While other MediaPost newsletters and articles remain free to all ... our new Research Intelligencer service is reserved for paid subscribers ...

Subscribe today to gain access to the every Research Intelligencer article we publish as well as the exclusive daily newsletter, full access to The MediaPost Cases, first-look research and daily insights from Joe Mandese, Editor in Chief.

M-Commerce Growing, Limited Interest In Location-Based Marketing

Following an upswing in mobile shopping activity during the holiday season, Forrester expects m-commerce to maintain its momentum during 2011. The combination of rising smartphone use, a
growing range of mobile retail apps and location-based services is setting the stage for continued growth.

There's certainly room for greater uptake of m-commerce services, since the
proportion of people using them is still small, according to Forrester. A second-quarter 2010 survey showed that 6% of U.S. mobile users had used a shopping app in the last three months, and 12% said
they planned to use their phones to find or redeem coupons during the holiday season.

Forrester doesn't have a formal m-commerce revenue forecast, but a 2010 survey the firm conducted with
Shop.org showed that about 2% of online retail sales were coming from mobile. Given Forrester's estimate of $191 billion in online retail sales this year, that would amount to nearly $4 billion via
mobile in 2011.

advertisement

advertisement

Yet despite the buzz surrounding startups like Foursquare and Groupon, the research firm found limited interest in location-based marketing on mobile phones. Only 6% want local
offers and only 4% want time-sensitive promotions such as daily deals.

That hasn't stopped companies such as Xtify, Placecast and Location Labs from introducing geo-fencing technologies that
retailers can incorporate into apps to track when customers are near stores and try to entice them with special offers or discounts. Xtify and Location Labs rely on a phone's GPS technology, while
Placecast uses carrier cell towers for location.

The reports noted that the iPhone and Android phones allow retailers to send notifications about products or promotions to customers based on
their location. "These smartphone operating systems also support multitasking, thus allowing applications to communicate users locations to the retailer even when the application is not in use,"
according to the new study authored by Forrester analyst
Peter Sheldon.

Other m-commerce apps, like shopkick, are triggered when users enter a store, awarding them points toward a purchase just for walking in. After launching last fall at retailers
including Macy's and Best Buy, Shopkick said this month its app had 750,000 users.

While encouraging executives to embrace m-commerce opportunities, Forrester also issues caveats for
retailers. First, understand your audience and build your strategy accordingly. "Young, early-adopting consumers familiar with location services from Facebook and Foursquare are more likely to embrace
location-based commerce than an older, more affluent audience," the report stated.

It also recommends focusing on enhancing the customer's shopping trip by alerting them via mobile to things
like the store being open late that night or that their in-store pick-up is ready. These steps will build trust and make shoppers more comfortable with location-based notifications.

Other
suggestions include emphasizing personalization features to tailor mobile content to individual users, testing and gradually rolling out m-commerce initiatives and alleviating customer concerns about
privacy. "It is critical that retailers also allow consumers the ability to disable and configure these services with the application and must assure consumers that their location history will never
be recorded, shared or used for purposes other than intended," advised Sheldon.

It is not surprising that the initial sales are weak. We have, at best a soft economy where everyone is watching every penny and people are tied into 2 year service agreements with their existing phones. People will convert over to the iphone, but only as their present service agreement expires, and only if the terms, conditions and fees are in line with what they are already paying. No one is looking to upgrade, take a penalty and pay more for the same service that they already have.